July 7, 2014 SOFTWARE M&A ACTIVITY OFF TO A ROBUST START IN 2014

Berkery Noyes has issued its Software report for first half 2014. Transaction volume increased six percent in first half 2014. This was the third consecutive rise in volume examined on a half year basis. Deal value gained five percent, totaling $57.61 billion year-to-date. The median revenue multiple remained nearly constant at 2.4x, while the median EBITDA multiple declined from 10.9x to 9.2x.

The industry’s most active acquirer in first half 2014 was Vista Equity Partners with 12 transactions. Meanwhile, Google was the most active strategic acquirer with 11 software transactions.

As for software used within specific vertical industries or “Niche Software,” transaction volume increased 13 percent, making it the fastest growing market over the past six months. The segment’s largest deal in first half 2014 was Oracle’s $4.4 billion acquisition of MICROS Systems, a provider of point-of sale (POS) and other integrated solutions for the hospitality and retail sectors.

Deal volume in the Business Software segment increased six percent compared to second half 2013. One key trend in the segment is the transition from desktop to mobile that many enterprises are implementing. Corporate IT departments are looking for tools to facilitate this transition, which is a potential reason for the heightened interest in the enterprise mobility subsector.

Notable enterprise mobility transactions in first half 2014 included VMware’s acquisition of AirWatch for $1.12 billion and Google’s acquisition of Divide.

“The surge in M&A activity across many of the Software Industry’s sectors is rooted in sound strategy as major technology companies seek greater mass and diversity, formerly emerging technologies mature, and financial buyers look to invest in quality assets,” said James Berkery, Chief Information Officer at Berkery Noyes. “With generally strong balance sheets and healthy income statements, the major strategic buyers are, by and large, seeking acquisitions that offer additional growth opportunities.”